The following transactions occurred over the months of September to December at Nicole's Getaway Spa (NGS). September Sold spa merchandise to Ashley Welch Beauty for $1,300 on account; the cost of these goods to NGS was $700. October Sold merchandise to Kelly Fast Nail Gallery for $250 on account; the cost of these goods to NS was $100. November Sold merchandise to Raea Gooding Wellness for $100 on account; the cost of these goods to NGS was $90. December Received $900 from Ashley Welch Beauty for payment on its account. Required: 1. Prepare journal entries for each of the transactions. Assume a perpetual inventory system. 2. Estimate the Allowance for Doubtful Accounts required at December 31, assuming the only receivables outstanding at December 31 arise from the transactions listed above. NGS uses the aging of accounts receivable method with the following uncollectible rates: one month, 1%; two months, 5%; three months, 20%; more than three months, 40%. 3. The Allowance for Doubtful Accounts balance was $37 (credit) before the end-of-period adjusting entry is made. Prepare the journal entry to account for the Bad Debt Expense. 4. Assume the end of the previous year showed net accounts receivable of $700, and net sales for the current year are $8,000. Calculate the accounts receivable turnover ratio. 5. Audrey's Mineral Spa has an accounts receivable turnover ratio of 8.0 times. How does NGS compare to this competitor? Prepare journal entries for each of the transactions. Assume a perpetual inventory system. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) No General Journal Credit Date September Debit 1,300 1 Accounts Receivable Sales Revenue 1,300 2 September 700 Cost of Goods Sold Inventory 700 3 October 250 Accounts Receivable Sales Revenue 250 4 October 100 Cost of Goods Sold Inventory 100 5 November 100 Accounts Receivable Sales Revenue 100 6 November 90 Cost of Goods Sold Inventory 90 7 December Cash 900 Accounts Receivable 900 Estimate the Allowance for Doubtful Accounts required at December 31, assuming the only receivables outstanding at December 31 arise from the transactions listed above. NGS uses the aging of accounts receivable method with the following uncollectible rates: one month, 1%; two months, 5%; three months, 20%; more than three months, 40%. 5 Estimated Uncollectible One Month $ Two Months Three Months More than Three Months Total 50 136 191 The Allowance for Doubtful Accounts balance was $37 (credit) before the end-of-period adjusting entry is made. Prepare the journal entry to account for the Bad Debt Expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) Transaction Debit Credit No 1 a. General Journal Bad Debt Expense Allowance for Doubtful Accounts 154 154 Assume the end of the previous year showed net accounts receivable of $700, and net sales for the current year are $8,000. Calculate the accounts receivable turnover ratio. (Do not round intermediate calculations. Round your final answer to 1 decimal place) Accounts Receivable Turnover Ratio 11.4 X times
